by: Corey Schwartz

Loanatik: the Modern Mortgage Company

The ability to recognize an opportunity is the dividing line between those who innovate and the rest that follow. If you don’t quickly recognize good information, internalize it and act decisively; the opportunity passes you by. Ponder, wait or ignore what I’m about to tell you and it will be too late to take advantage of it. I am opening a new mortgage banking operation and I am giving you an opportunity to invest along with me in its success. As Real Estate Investors we should always be in the market. Whether the market is rising or falling we’re always in. We know the Real Estate Market is cyclical. Internalizing that statement means that in lock step with the market cycles we should change how we invest to maximize profit. I was a private lender from 2000-2007, Commercial mortgage broker from 2007-2010 and an equity investor from 2010 through present (gimme a call and I’ll explain why each was the right move at that moment in time). In 2015 it’s time again to shift our investment focus to follow the market cycles. It’s time to become a lender and let me explain why.

Now is the time to move because of our country’s recent past: In December 2009 congress introduced a 2,300 page tome called the “Dodd–Frank” which was signed into law July 21, 2010. The Act was passed in a knee-jerk response to the Great Recession and brought with it the most sweeping changes in financial regulation seen since the Great Depression in 1929.

The Act formed new regulatory bodies who wrote 13,000 pages of new rules and regulations. Among other things, the Act changed the rules governing how residential property is financed.

 

The new rules made it difficult for consumers to qualify for a mortgage and hard for bankers to originate one. As a result many mortgage brokers were forced out of business. The regulations increased the cost of originating a mortgage, capped the maximum amount a lender can charge and placed a “put” on every loan a banker originates — even for minor errors. Worst of all, these changes created confusion and uncertainty in the housing sector of our economy, one of the most important economic drivers, while the market was in a downward spiral. These regulations made getting a conventional mortgage so difficult and complex that not even Ben Bernanke,

 

the former chairman of the Federal Reserve Bank, was able to refinance his own home loan (see the New York Times October 3, 2014, Why Ben Bernanke Can’t Refinance His Mortgage). This incredible over-regulation explains, to a large degree, why the housing market has taken so long to recover.
  • There is tremendous pent up demand for residential housing
  • The supply side of the market is highly constrained
  • Mortgage brokers were forced out of business from 2008-2012
  • Between 2015 and 2018 the people that filed bankruptcy or had short sales will again qualify for mortgages
  • Because of the Dodd-Frank, it’s very difficult to become a lender
  • Because of the OCC, FDIC, the FED and state regulators it’s almost impossible to start a bank
  • Our attorneys have had time to fully understand how to lend under Dodd-Frank
  • Highly specialized compliance software is recently available
  • Inertia will keep some potential competitors from making changes
  • Technical complexity will form a barrier to entry into the world of online lending

Put this all together and we have an unprecedented opportunity to become a powerful force in conventional mortgage lending. The opportunity is in normal everyday loans backed by government guarantees from Fannie Mae, Freddie Mac and the VA. This isn’t rocket science, it’s residential lending.

In the near future, Lending will be done differently

The new regulation capped lender income at 3% and increasing the cost of compliance. Just a few years ago a mid sized lender would have one compliance officer, now they have 10. These regulations make it unprofitable for small mortgage banks to operate. HUD says that until they exceed $250 million dollars of originations that small mortgage banks cannot afford to do the required compliance. Even at that level, margins are thin.

To substantially improve profitability, bankers will be forced to become highly efficient and automate tasks that were once handled by loan officers. Sophisticated CRM systems with automated, highly personalized communication will become the standard. Fully automated, online loan quotes and extraordinary user experiences will be the new normal. This is a significant shift in the operating model for many firms. The change requires a strong background in technology. In addition, I believe that over time the market will shift to primarily an online user experience blended with a new brick and mortar experience which will require substantial investment by existing companies into marketing and technology that they are not familiar with. Couple that with the inertia of legacy software, existing leases and a desire not to fire people and the result will be that many existing lenders are unable to compete in the changing market.

What Makes Me Qualified To Enter This Market?

I am uniquely qualified to enter the residential mortgage market as a lender. Aside from my 3,690 year heritage as a lender, I was licensed by the State of Arizona from 2004 through 2010 as a residential mortgage broker and the Arizona Responsible Individual for the 4th largest private lender in the state. I hold a combined degree in computer science and economics from Rutgers University and owned an international direct marketing company that sold computer software tools for nerds, before it was cool to be a nerd. I have personally authored commercial software that tens of thousands of people use to create programs that run the world. I was doing database marketing before companies had websites or knew what “Big Data” was. The new residential lending market draws on all of the experience I’ve had in my close to 30 year career in software, consumer marketing, real estate and lending. I can’t think of anyone I know that is better suited to head this firm at this moment in time.

You have an opportunity to invest alongside me in Loanatik.com

I have a fantastic record of moving with the market. I sold Programmer’s Warehouse, my software distribution company, in 1995 and shifted to private lending. Within two years of that sale all of my competitors in the software business had either changed their model, sold or gone out of business. Serinova Financial, my private lending company was ranked as the 4th largest private lender in the state of Arizona by the AZ Business Journal. I closed down Serinova’s private lending fund and returned money to investors in 2007 — before the real estate market crashed. Then I built and manage three real estate investment funds that today hold $40-50MM in assets. Last year, my CDIF fund increased in value over 28%, the fixed income fund I run pays investors a solid 10% return and has never missed a payment. We anticipate selling the Crown Plaza Hotel at Sky Harbor Airport for approximately $30MM in 2015, which is quite an improvement over the $5.5MM we acquired it for, all due to impeccable market timing. This results were achieved during some of the most turbulent times in the real estate market when everyone was afraid to invest and thought the sky was falling. These moves were no accident. They were planned and executed with surgical accuracy long before the rest of the market understood the market dynamics.

What Does This Mean?

It means that we investing heavily in a new residential mortgage lending company named Loanatik.com.

For the last year we have been feverously preparing to move into this market. We built a team and invested in infrastructure. We made alliances, hired consultants, studied markets, arranged for back office loan processing, underwriting, funding and secondary market sales. We completed market research and created a fantastic consumer brand — LOANATIK.COM. We’ve had a custom CRM system built and are in the process of integrating it into a state of the art IP phone system. In November, we publically announced that we would enter the mortgage banking market to fulfilling the needs of conventional borrowers. At this moment, we are able to originate conventional loans in 10 states including Florida and Arizona, we have loan officers ready to originate and, in an unrelated transaction I am preparing to purchase an FDIC insured bank. While I am very proud of everything my team has accomplished we are just beginning and there are a million more things that need to be done.

LOANATIK.COM will be launched in the coming months, radio and television ads need to be created, media needs to be purchased, PPC ads need to be bought. Even though our site is not yet active, we have begun receiving leads and processing loans. This is so exciting it’s hard to convey.

What this means for you is that for a very limited time you can leverage my knowledge, expertise and two years of preparation and relationships taking advantage of my plans for future growth. This is a rare, unique opportunity to get in on the ground floor of what might be the next Priceline, NetFlix or Amazon. As one of my loyal investors, we want to make sure you have an opportunity to invest with us.

We are offering to you an opportunity to invest $25,000 or more and join us in our growth. We are raising a maximum of $500,000 dollars in this round and will quickly do future rounds within increased valuations.

Sounds Very Good – Tell Me More:

We considered several routes to raise this capital and decided to first offer this to our friends, family and existing clients, on a limited basis, before we allowed professional investors, investment banks or family offices to invest. As you know, this aligns well with our tendency to work with individual investors, rather than larger institutions. It is important to get in now / get in early as there only a few investors able to participate in this round.

What Would I Own?

An investment in Loanatik will be secured by all of our company-owned assets, our profit sharing interests in our trademarks, our recurring revenue streams from licensing fees, click through revenue, web traffic revenue and an opportunity to invest in the other ventures we create like the bank. In this offering, we intend to sell approximately 25% of the company for $500,000. We do reserve the right to terminate the offering at any time and/or increase the valuation.

What’s Next?

If you would like to be one of the very few people to own a piece of Loanatik.com, email or call me now at 602-739-7060. Please note that investment in this company is on a first come, first serve basis. To invest, you will complete a simple subscription agreement and deposit your funds into escrow.

Thank you. We look forward to you being a part of our company and our growth.

This is not an offer to sell a security, which offer can only be made by way of a Private Offering Memorandum containing all material information and disclosure of relevant risks in connection with any such investment.This letter, together with other statements and information publicly disseminated by the Company, contains certain forward looking statements within the meaning of Sect 27A of the Securities Act, as amended, and Sect 21E of the Securities Exchg Act, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. Forward-looking statements in this press release include, among others, statements about the outlook for income, expenses, profit, adjusted EBITDA and derivations thereof. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the Company’s dependence on third party marketing firms, including its inability to implement strategic business decisions directly, (ii) risks associated with the lending industry, including competition, increases in wages, compliance costs and other operating costs, actual or threatened terrorist attacks, downturns in general and local economic conditions and cancellation of or delays in the completion of anticipated demand generators, (iii) the availability and terms of financing and capital and the general volatility of securities markets, (iv) risks associated with the real estate industry, including and costs of complying with the Dodd-Frank Act, RESPA, Regulation Z and similar laws, (v) interest rate increases, (vi) the possible failure of the Company to qualify as a partnership under the Code and the risk of changes in tax laws affecting partnerships, (vii) the possibility of uninsured losses, (viii) risks associated with launching a new company, including delays and cost overruns and (ix) the risk factors discussed in the Company’s Offering Memorandum as updated by its Supplements and Amendments. Accordingly, there is no assurance that the Company’s expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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